The payoff matrix below shows the extra profit firms X and Z will earn from two different strategies,A and B.
-Refer to the payoff matrix above.This game is __________ because __________.
A) a Nash equilibrium;both firms pick the same strategy
B) a prisoner's dilemma;both firms have a dominant strategy
C) not a prisoner's dilemma;playing their dominated strategies does not make both firms better off
D) not a prisoner's dilemma;both firms pick different strategies
E) not a Nash equilibrium;the outcome is indeterminate

Question

The payoff matrix below shows the extra profit firms X and Z will earn from two different strategies,A and B. 
-Refer to the payoff matrix above.This game is __________ because __________.
A) a Nash equilibrium;both firms pick the same strategy 
B) a prisoner's dilemma;both firms have a dominant strategy 
C) not a prisoner's dilemma;playing their dominated strategies does not make both firms better off 
D) not a prisoner's dilemma;both firms pick different strategies 
E) not a Nash equilibrium;the outcome is indeterminate

Quizplus · Accepted Answer

This is not a prisoner's dilemma because playing their dominated strategies (A for Firm X and B for Firm Z) does not make both firms better off. In fact, they both have a higher payoff if they both play strategy B, which is not their dominated strategy. Therefore, the rational choice for both firms would be to play strategy B.

The Payoff Matrix Below Shows the Extra Profit Firms X